Anti-Greece Statements Will 'Destroy' Deal: Greek Minister

Issuing statements which criticize Greek efforts to resolve its debt crisis could “destroy” the latest bailout deal for the embattled Mediterranean country, a key member of the Greek government told CNBC Monday.

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Pavlos Yeroulanos, Cultural & Tourism Minister of Greece, warned: “If you are speaking with both sides of your mouth, one side to the markets and one side to the electorate, then you are going to destroy what you are trying to create.”

“Germany needs the euro just as much as Greece does. They need to decide whether they will make a real commitment to the euro, which has been a great thing for the German economy,” he added.

“We have taken some very important moves towards a stronger union, and then we see statements by people which undermine the steps that the EU made.”

There have been tensions between Germany – the euro zone’s strongest economy – and Greece over the 130 billion euros ($172 billion) deal. German Finance Minister Wolfgang Schaueble said that Greece’s promises “aren’t enough for us any more” earlier this month.

Protestors in Athens have burned German flags to protest against the perceived harshness of austerity measures imposed by the troika of the International Monetary Fund, European Central Bank and European Union, which is lending Greece money to repay its debts.

“The Achilles heel of the program is what happens with salaries and pensions. This is what causes unrest and gets images on television,” Yeroulanos, who is a member of George Papandreou’s Pasok party, said.

“We would much rather have an easier way there, but we are trying to reestablish trust with our creditors.”

Greece’s bondholders have had to accept a 53.5 percent haircut to the value of their debt as part of the deal to stop Greece defaulting on its debt repayments.

Greece’s debt-to-GDP ratio is more than 160 percent at the moment, and it is supposed to cut this ratio to 120.5 percent by 2020 as part of the new bailout deal. There are concerns that the austerity measures imposed may not stimulate growth enough.

Greece is still one of the most difficult countries to do business in, because of the burden of bureaucracy, according to the World Bank.

“We are changing in a couple of years what hasn’t changed in Greece in the past 30: bureaucracy, the process of opening a business, these things are changing,” Yerolanos said.

“To make the Greek economy more competitive and invest in key sectors that help it grow is our challenge.”

His government has been criticized for not acting faster after the first bailout deal in 2010.

“The problem is not passing legislation, it’s inertia on implementation. You need a strong government who is going to face down the finance ministry, the trade unions, the vested interests, all of which they should have done already,” Alistair Newton, senior political analyst at Nomura, told CNBC.

There is growing speculation that Greece would be best to exit the euro and benefit from being a cheaper place to come on holiday or buy goods.

Yerolanos said that the short-term benefits of leaving the euro, such as increased tourism, would “nullify” themselves very soon because of the impact on Greek salaries, pensions and buying power.

The majority of Greek people still support the euro, according to polls,

With elections due later this year, possibly in April, there are worries that the current technocrat government may be replaced by an extreme left or right wing party which will try to back out of the bailout terms.

Yerolanos believes that New Democracy and his own party Pasok, the country’s two main parties, which have signed up to the most recent bailout, will not be able to form governments on their own. He added that delaying the election until the results of austerity are clearer would be a good idea.

Newton agrees, and warned that there was a chance an extreme party would win.

“Cognitive dissonance happens in elections and people may vote for parties who aren’t going to do what they want as a protest vote,” he said.

“It’s unsure just how much governing the Greek government is going to be, whoever is leading it.”